We have written extensively about what the Commonwealth Government’s Research & Development Tax Incentive (RDTI) program is all about. We have also written about how eligibility to the program works, who should apply and what is required to access the program. Many of these articles are linked below, click on the headings to view some of them.

In this article we will list 5 common mistakes that companies make either in assessing their eligibility to the program or in claiming under the program.

1. Companies are unaware of the opportunity available through the RDTI (Free Money): It seems incredulous that many companies are not aware of the generous subsidies available for eligible R&D in Australia. To be fair, many companies have explored the opportunity, but have either been frustrated in their attempts to create eligible activities or have been advised that they are not eligible, when in fact they might have been, with just some small adjustments in their R&D planning.

2. Most RDTI claims are made looking backwards, rather than looking forwards: This approach is not only fairly normal, it is also quite risky and unlikely to result in the ability of any company to maximise their eligible R&D claim. Rather than try to remember what you have done and try to get your activities to fit in with the legislative requirements, it makes far more sense to plan your R&D at the beginning of the financial year and undertake your activities with full knowledge that they comply with those requirements.

3. Companies tend to view the RDTI primarily as a tax advisory issue: The reality is the RDTI program is primarily an R&D grant program, that is paid for through the Australian Taxation Office (ATO) and therefore does involve tax advisory, but only from the perspective of evidencing eligible expenditure and how the program may affect the financial position of a business and its shareholders. The main thrust of the program is about eligible R&D which is administered by the Department of Industry, Science, Energy and Resources (DISER) – and specifically with its AusIndustry team.

4. R&D plans and documentation processes are not set up or understood properly to ensure successful RDTI claims: It is critical for companies to both understand the eligibility requirements of their own R&D and also the documentation requirements for evidencing their eligible expenditure claims. If they do not understand these requirements they run the risk of their claims being ruled ineligible through review processes initiated by either AusIndustry or the ATO.

5. Companies miscalculate the risk of penalty and consequences associated with incorrectly supported claims: The risks range from paying back the monies you may have previously claimed through the RDTI to having additional financial penalties imposed by the ATO, all the way through to a reluctance to take advantage of future eligible R&D and therefore free money through these subsidies, because of previous bad experiences with the program. The result of this last issue could have far longer and more dire consequences for the future health and viability of a company, than the short-term pain of financial penalties.

The end of the financial year provides a perfect pivot point to reassess strategic aims and goals and to consolidate business planning for the year ahead. If you consider your firm to be innovative and the RDTI does not form an essential part of your plans for the coming year, then you should discuss your plans with an R&D consultant (like R&D Certainty) and reconsider the opportunities that the RDTI might provide.

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